“This bear market and this recession are following the script almost exactly,” according to Alan Skrainka, chief market strategist for Edward Jones, the St. Louis-based brokerage.
Recessions tend to average about 11 months, and the current one is 11 months old, said Mr. Skrainka in an interview yesterday. He spoke to about 100 Toledo-area investors at Highland Meadows Golf Club in Sylvania. He added that bear markets historically last an average of 13 months, and this one has gone on abut 23 months already, having started in March, 2000, when the Nasdaq composite average topped 5,000 before beginning its long slide down.
“By the time we officially realize we're in recession it's almost over,” remarked Mr. Skrainka. “The last eight recessions anticipated [the recovery] about six months ahead. If we think the recession is ending around now, [then] September marked the [market] lows.”
The combination of a recession and bear market has been tough on investors, Mr. Skrainka noted. “This bear market was made worse by bursting of the technology bubble, and no one can say for certain when it will end.”
And, he said, “a lot of folks are giving up on the stock market, but this is the wrong time to do that. [Investors] should look for opportunities.”
Mr. Skrainka believes that “bear markets are long-term investors' best friends. They can buy quality securities at a good price.”
He said investors can no longer look forward to the double-digit stock returns of the past, and certainly not to the 20-plus percent returns of the late 1990s. Because of lower profit growth and lower dividend payouts, investors should realistically expect stock returns in the 7-8 percent range for the foreseeable future, he maintained. “But now 7 to 8 percent still should beat bonds and cash,” he said.
The Enron accounting scandal has been a serious drag on the market, “and [many] investors question the integrity of the financial-reporting system,” Mr. Skrainka acknowledged. But he believes that “the economy is a stronger influence on [the market] than Enron” and that “once the fears subside, [investors will see] very sensible regulations that will strengthen the system, with better transparency and rules that make sense to investors.”
In good times and bad, Mr. Skrainka's advice to investors is: “Buy quality securities, diversify, and then stay the course.”